US video distributor Image Entertainment has pulled out of its merger with David Bergstein affiliate BTP Acquisition Company and demanded prompt payment of a $4.2m business interruption fee.

Image made its move after reportedly growing tired of waiting for BTP to complete the necessary financing on the deal, initially announced early last year 2007.

At that time both parties spoke effusively about the mutually beneficial effects of a transaction. For Image a merger offered value to stockholders because it allowed the company to remain a viable force in the home entertainment sector.

Meanwhile Bergstein was hoping to slot Image in as a key component in his nascent entertainment empire - which includes the UK's Capitol Films and New York-based THINKFilm.

However neither side will get their way now after Image announced it had given notice of termination of its June 27 2007 amended and restate merger agreement with BTP.

'Image granted numerous requests made by BTP to extend the closing date to allow BTP the time to finalise the required financing for the merger,' an Image spokesman said. 'We are very disappointed that despite Image's willingness to close the merger and enormous patience, BTP was either unable or unwilling to finance the transaction.

'We remain committed to enhancing shareholder value and believe the immediate need is to move forward and focus our energies on our business.'

Image has requested that R2D2 and its wholly owned subsidiary CT1 Holdings pay Image the $4.2m business interruption fee. Image has instructed that the $3m currently deposited in trust be released and that BTP provide the remaining $1.2m in cash.

In its filings with the Securities & Exchange Commission, BTP identified R2D2 as its sole owner and Bergstein and Ron Tutor as the sole owners of R2D2. The parties have terminated discussions that began on Feb 1 2008.